Collective workplace pensions proposed

Employers will have more choice over the type of workplace pension scheme they offer after proposals for collective schemes were announced during the Queen’s speech.

The Private Pensions Bill enables the introduction of Dutch-style collective defined contribution (CDC) pensions, which allow thousands of individuals to contribute to an industry-wide collective pot.

This larger pot can be used to invest in a wider range of investments than an individual pot, which can help to spread risk and achieve higher growth. CDC scheme savers are also given a target for their pension income, which isn’t guaranteed but can provide more certainty for retirement.

Reaction from business groups

Katja Hall, deputy director-general of the Confederation of British Industry, welcomed the move:

“We welcome the Government’s aims to boost choice and flexibility in the pensions market and Collective Defined Contribution schemes will play a part in this. These schemes are complex, so they are likely to be offered only by a few large employers keen to provide their employees with something more predictable than existing defined contribution schemes.”

John Longworth, director-general of the British Chambers of Commerce, said:

“If the government does introduce a collective defined contribution scheme (CDC), it must ensure that the perceived benefits are not overplayed, and that prospective participants are made aware of the possible pitfalls of entering such a scheme – particularly around risk and access to funds.”

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